March 11, 2016 / 4:10 PM / 4 years ago

Kurdistan resumes oil exports after three-week break squeezes budget

LONDON (Reuters) - Iraq’s Kurdistan was reconnected to oil markets on Friday as pumping from its fields to Turkey resumed, providing the semi-autonomous region with a lifeline amid a budget crisis and a fight against Islamic State.

An industry source told Reuters pumping of Kurdish oil to the Turkish Mediterranean port of Ceyhan had restarted after a three-week interruption following a military operation on Turkish territory against Kurdish militants. Port sources said Ceyhan could resume loadings later on Friday.

Oil is the main source of Kurdistan’s revenues and the suspension further squeezed the already cash-strapped region’s finances.

Turkey has invested heavily in Kurdistan’s oil industry and on Friday Ankara transferred $200 million to Erbil to help Kurdish finances hit by the pipeline stoppage, two industry sources told Reuters on Friday.

“An emergency aid transfer has been sent to KRG (Kurdistan Regional Government) this week.... The halt has deprived the KRG of an important source of revenue,” one of the sources said.

Turkey completed a military campaign earlier this week near its southeastern border, shutting the pipeline that normally carries 600,000 barrels per day as the military searched for mines.

Violence has surged after a two-year ceasefire between Turkey and Kurdish militants broke down last July.

Turkey’s military launched a large-scale campaign in a handful of towns in the mainly Kurdish southeast after the youth wing of the Kurdistan Workers Party (PKK) sealed off entire districts and declared autonomy.

Turkey accused the PKK, considered a terrorist group by Turkey, the United States and the European Union, of blowing up the pipeline on Feb. 25 when pumping had already halted. The group denies the accusation.

The outage left the Kurdistan Regional Government (KRG) with just $233 million in net revenue from its oil exports in February - less than one third of what it needs to cover its public payroll.

Even before the pipe closure, the KRG was running a multi-million-dollar monthly deficit as oil prices sank. Conflict with Islamic State militants and an influx of people displaced by violence in the rest of Iraq have increased the strain.

Additional reporting by Humeyra Pamuk; Editing by Dale Hudson and Elaine Hardcastle

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